Activision Blizzard’s first-quarter profit forecast misses estimates

(Reuters) – Activision Blizzard Inc reported weaker-than-expected in the fourth quarter revenue and forecast current quarter revenue and profit below analysts’ estimates on Tuesday, as it faces the competition of “Fortnite” and invests more in the development of its games.

FILE PHOTO: Attendees walk past a “Call of Duty” – advertising at E3 2017 the Electronic Entertainment Expo in Los Angeles, California, USA June 13, 2017. REUTERS/ Mike Blake

The company said it would invest more in the biggest franchises and cut jobs as it restructures certain companies that do not live up to the expectations.

As part of these restructuring actions, Activision expects to incur a pre-tax charge of approximately $150 million, of which the largest part is expected to be incurred this year.

However, the company said that the number of developers working on games such as “Call of Duty”, “Candy Crush”, “Overwatch”, “Warcraft”, “Hearthstone” and “Devil” in total will increase by about 20% in the course of the year 2019.

Activision also forecast current-quarter adjusted revenue of $1.18 billion and a profit of 20 cents per share, missing analysts ‘ average estimates of $1.45 billion and 46 cents per share, according to IBES data of Refinitiv.

The company’s full year outlook for adjusted earnings of $2.1 per share and revenue of $6.30 billion also came in below Wall Street estimates. Analysts were expecting a profit of $2.54 per share and revenue of $7.25 billion.

Activision said that it expects that the limited pre-game releases in certain business segments.

For the reported quarter, Santa Monica, California-based Activision reported total adjusted revenue of $2.84 billion. Analysts on average had expected revenue of $ 3.04 billion.

Excluding items, the company earned $1.29 per share.

Activision’s results follow weak reports of other rival publishers like Take-Two Interactive Software, Inc and Electronic Arts Inc, adding to the fear that the competition of the free-to-play battle royale games “Fortnite” and “PUBG”, the food was in the sale.

The battle royale format, in multi-player gaming, allowing dozens of players to battle each other to the last survivor, was extremely popular in 2018, and the two games are credited with the introduction of new audiences to gaming.

EA and Take-Two both popped up last week when their predictions came in short of Wall Street estimates.

Activision reported a net income of $650 million, or 84 cents per share in the fourth quarter ended december. 31, compared with a loss of $584 million, or 77 cents per share, a year earlier, when a charge related to the U.S. fiscal legislation.

Reporting by Arjuna Panchadar in Bengaluru; Editing by Shounak Dasgupta

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